Board saddles up for track debate

April 13, 1994|By Jon Morgan | Jon Morgan,Sun Staff Writer

The operators of Maryland's major thoroughbred racetracks, seeking to revive a moribund industry, invested heavily last year in new betting technology. The off-track betting parlors and simulcasts eventually could benefit Laurel and Pimlico race courses, but there was little evidence of a payoff last year, according to a review of financial documents released last month.

The total handle went up by 5.9 percent in 1993, but just about every other measurement of track health dropped, from purses paid out to admissions collected. And Laurel finished the year with about three times more liabilities than assets.

This -- and a $7.23 million loss for the tracks last year -- has raised the concern of the Maryland Racing Commission, which worries that troubles at the tracks could damage Maryland's centuries-old breeding and racing industries.

Today, the commission will review the audited reports at a public hearing at 11 a.m. in the Vista Room at the Timonium Race Course administration building. Pimlico/Laurel owner Joe De Francis is expected to face some tough questions.

"Obviously, we are going to be looking much more carefully into the numbers because of the size of the deficits, and we want to assure ourselves that management of the tracks is doing everything possible," said John McDaniels, chairman of the Maryland Racing Commission.

But, he said, he wants short-term problems separated from long-term trends. The tracks are privately owned, and the commission is limited in what it can do, McDaniels said.

De Francis said the trends are moving in the right direction, and resists analysis based on 1993, because the innovations didn't come on line until midyear. The tracks were losing $1 million a month until the second half of the year, when they started to break even, he said.

"On balance, this has been extremely successful, but there are certain pitfalls that we need to watch out for," De Francis said.

John H. Mosner Jr., a member of the racing commission who is heading a committee looking into track finances, said it's difficult to assess whether the innovations will save the industry, as De Francis has predicted. "The waters are muddied by the losses they are taking," he said.

Mosner said many of last year's losses are one-time-only items, and he believes the tracks would have performed worse last year without the new forms of betting. "The thing that concerns me, the thing thatdrives the industry, is the mutuel handle. It has gone up, but it hasn't raised the bottom line" at the Maryland tracks, he said.

"Joe is a bright, articulate man and I know his intentions are to succeed," Mosner said. "But I think he has to exercise a lot more discipline."

Live vs. simulcast

The success of the innovations is a big part of the problem. Fans have embraced simulcasts, and are wagering more than half of their dollars on them. But the simulcasts are less profitable to the tracks than live races, and when fans pick an electronic race over a live one, it hurts the tracks.

Simulcasting and a network of satellite betting parlors came on line gradually last year, starting in April. Even with the late start, the electronic wagering represented about a third of all the betting last year, and bets at the track on live races were down more than $100 million, or about 30 percent.

For the first quarter of this year, total betting was up about 40 percent, something track managers pointed to as evidence of a strong recovery. But the first quarter of last year was one of the worst in the tracks' history, a period during which De Francis has said they lost $4 million.

And wagers on live races fell by a third in the first three months of this year, compared with the same period last year, and represented 43 percent of the track's handle -- a less profitable mix than last year's.

"If you're taking simulcasts from other tracks, your profit margin may not be as great, but there should not be losses," Mosner said.

Another factor in the financial troubles at the tracks is that fewer fans are turning out, cutting into income from admissions, concessions and parking.

Attendance last year dropped to 2.4 million, from 2.6 million the year before. Admission revenue, adjusted for discounts, fell 8 percent, to $4.24 million. Money made from food and other concessions fell almost 40 percent and from parking 20 percent.

Allowing fans at the Rosecroft harness track to make bets on races at Pimlico and Laurel -- another innovation last year -- cut into attendance at the thoroughbred tracks, De Francis said.

Meanwhile, general expenses rose about 10 percent last year. Some of this related to settling lawsuits with De Francis' estranged partners and applying for a license to operate a racetrack in Virginia. The First National Bank, in restructuring its loan to the tracks early this year, also demanded steep cuts in top-management salaries, including that of De Francis. Those cuts should save more than $1 million next year.